Vitabiotics – a potent growth story

There’s a UK company working at the intersection of food and pharmaceuticals which has been quietly clocking up sustained growth by making smart strategic choices and strong marketing execution.

Vitabiotics was established in 1971 by Kartar Lalvani who was later joined by his former tutor Professor Arnold Beckett. The current CEO Tej Lalvani took over the company in 2015 from his father Kartar (who then became the firm’s Chairman). More recently known for his role as a judge on the UK version of Dragon’s Den, Tej has been credited with driving strong growth since he became COO in 2008.

Judge Tej – joined the family firm straight from university

I’d argue that private ownership and financial independence have provided the stability and continuity for the growth momentum. According to its 2017 accounts, turnover exceeded £120m, the firm widened its market share advantage versus competitors, whilst still delivering an impressive 26% operating profit margin.

20 years of profitable sales growth accelerated in earnest from around the time Tej became Chief Operating Officer in 2008

Vitabiotics has supplements in various health categories with brands that include Perfectil (skin, hair, and nails), Pregnacare, Menopace, Wellkid, Wellbaby, Wellman, and Wellwoman.

Although a familiar sight in stores across the country and available globally, the firms performance is easy to overlook. In this article we explore some of the choices that have helped facilitate such sustained and profitable growth.

____________

Landscape

The global ‘nutraceuticals’ industry is worth around $250bn (KPMG) – about 5x bigger than in 2000. It’s attracting new entrants from both food and pharma players in part because of the respective growth challenges they face.

In food, slow market growth, the consolidation of retailer power and accompanying growth of own label products can to some extent be countered by the higher margins, innovation and consumer preference for brands in nutraceuticals. With operating profits between 20-30%, Vitabiotics performance looks pretty attractive to food companies that might typically make about 10% on the bottom line.

Vitamin brand Centrum is owned by drug giant Pfizer

Meanwhile in pharma, firms are experiencing a declining return on R&D investment, pressures on public health budgets, “patent cliffs” (when the patents of branded drugs expire and they face generic competition) and onerous regulatory requirements. Nutraceuticals offers pure-play pharma firms a new source of revenue, largely driven by consumers and often with less regulatory burden.

However, regulation varies enormously across the world. The US and Japan are the two largest markets for nutraceuticals with most relevant standards based on food and supplement regulation. The EU and China are tougher environments – the former because it exercises tight control over what claims can be made and the later has a lengthy and expensive approval process that spans multiple agencies.

Vitabiotics is sandwiched between food and pharma industries and more recently, faces competition from emergent and fast-growing brands in nutrition

Competition

This growing segment attracts attention from both food and pharm players. In food, functional propositions such as Yakult, Herbalife, Activia and even plant-based milks are competing for share of spend on health and wellness. Nutritionally-complete meal replacments such as Huel and Soylent (which operate a direct-to-consumer model) are attracting investment and growing fast.

From pharma, Seven Seas, Centrum and Berocca are all direct competitors and owned by pharma companies. Aside from more conventional supplements, drug companies (like Accera in the US) are trying to increase the consumer-appeal of their products – such as Axona for Alzheimers. In the last few weeks GlaxoSmithKline and Pfizer announced the creation of a new consumer health company, the $13bn joint venture will bring together brand and distribution reach and is expected to be spun off in 3 years’ time.

New kid on the block – Huel is a fast-growing meal replacement that includes vitamins & minerals

More recently technology has also shaped the competitive landscape – specifically with the promise of personalised nutrition. One UK player DNAFit won the Queens Award for Enterprise last year for its service that makes DMA profiling available to consumers. A few months ago, conglomerate DSM bought a majority stake in Mixfit Inc a privately-held personalized nutrition start-up based in the US.

____________

Choices

So what marketing choices have helped the team at Vitabiotics to deliver a protracted period of top- and bottom-line growth?

Market choices

The UK – its home market – currently accounts for around 49% of turnover and continues to grow. Export performance has fallen behind expectations (-4% sales in 2017) as a result of economic and political uncertainty in its export markets. Despite this short-term frustration, the firm’s strategy is develop a presence in higher-growth markets such as Turkey and China, having previously concentrated on expansion in Africa.

Channel choices

Vitabiotics has the sort of broad-based physical availability that many marketers would envy. Widely stocked in the grocery channel, its products are also widely available in many health food stores and pharmacies.

 

The brand is also active in e-commerce. A wide range of products are available on Amazon and promoted with the ‘subscribe & save’ feature. The firm has a store as part of its Facebook presence and consumers can also shop directly on its website (and get products delivered to over 140 countries). It’s unclear however, what proportion of sales are currently made on/off line.

Consumer choices

The market naturally segments into different consumer needs, often associated with life stage and gender. In its report, KPMG identified growth ‘hot spots’ including for products that target brain health & brain aging, gut function, cardio & heart health and type 2 diabetes.

Vitabiotics offers products tailored to the specific nutritional needs of women, men, children and teens (as well as pets!). It operates across several consumer benefit spaces including pregnancy, menopause, beauty, hair, immunity, skin & nails, cartilage & bones, heart and brain health.

Brands & product choices

Vitabiotics claims to own 8 of the top 18 selling brands in the vitamin & mineral supplement (VMS) category.

Each significant benefit space is served by a Vitabiotics brand and the brand architecture is organised at three levels. Firstly, gender & life stage needs fall into the scope of the Well- brands (Wellwoman, Wellman, Wellbaby, Wellkid and Wellteen). Second, specific health & wellness needs are served by brands like Jointace, Feroglobin, Immunace, Diabetone and Osteocare. Thirdly, the firm sells a wide range of ingredient-led products (such as Zinc, various Vitamins, Calcium, Green Tea, Omega-3, etc).

The firm’s main product format is the digestible tablet, but it has expanded into liquids and even more recently, tea (with the launch of Tea+ a range of vitamin infused teabags).

Innovation choices

Innovation has played a big part in the firm’s strategy, in fact it’s part of the DNA. Vitabiotics wants to remain at the forefront of scientific developments in its key sectors and follows a strategy of marrying leading-edge research with insight about consumer health needs.

The firm’s former Chairman (Prof. Beckett) was widely regarded for his expertise and between them its current board of directors boosts an impressive array of scientific and medical qualifications. As well as accessing others’ scientific research, the firm already has several clinical trials of its own published; with others in progress or awaiting publication.

In recognition of its new product development, the business has received the Queens Award for Enterprise three times.

Vitabiotics makes good use of celebrity endorsement (like model David Gandy for whose guns we should thank Wellman)

Marketing communication choices

As a private company, marketing investment is hidden in a large bucket of administrative expenses in published accounts, so it’s unclear what proportion of sales are invested in brand support. However, Vitabiotics does use traditional media (TV, tube advertising & print), PR, but is now placing increasing emphasis on digital marketing and social media.

US singer Nicole Scherzinger battles a neck problem to promote Perfectil

Celebrity endorsement – has been a feature of the mix for several years. The brand currently has deals with singer Nicole Scherzinger and model David Gandy. Scherzinger is the face of its Perfectil beauty brand which targets healthy skin, hair and nails; staring in its 2017 TV ad. Gandy is the ambassador for Wellman, Vitabiotics’ range of supplements targeting the “nutritional and lifestyle needs” of men. Previously, top athletes were among Vitabiotics’ endorsers.

Vitabiotics previously used famous athletes as spokespeople in advertising

Traditional media – Vitabiotics first started TV advertising in 2013 as part of a 12-month £2m deal and has had a TV presence most years since. The brands also buy ambient and print media targeting consumers that could benefit from supplements, for example busy commuters on the Underground, or expectant mothers via parenting magazines.

A recent Instagram post

Social media – the firm has a strong and well-maintained presence across platforms – including Facebook, Instagram, Twitter, Pinterest and YouTube. Given the high quality of content, the biggest challenge for Vitabiotics is to grow its subscriber base in order to improve the return it gets on that investment.

Tools like this one are a novel way to engage website visitors with the product range

Content & digital marketing – The website includes a number of tools to drive engagement – such as the Wellness Score quiz which (conveniently!) leads to tailored product recommendations. The firm also has an interesting blog as well as other good quality content anchored in health & well being which it deploys across different channels.

Helping children explore muddy puddles with vigour

Licensing – more recently the firm has launched a Peppa Pig range of vitamins, under license from EntertainmentOne, in order to access the growing child/infant VMS market.

Culture

The one critical element underpinning this growth story is perhaps less a choice and more a characteristic.

 

Vitabiotics is a family concern and the only business that Tej Lalvani has worked in since graduating university. This undoubtedly installed a strong work ethic in the current CEO. In his own words, “I started at the bottom, sticking product labels on boxes in the warehouse. My dad was actually harder on me than he was on most people in the business because he expected a lot more. The last thing I got was special treatment.”

Also noteworthy is how fiercely the business celebrates and defends its independence. “We don’t have any outside investors, business loans or overdrafts,” Lalvani says proudly. “We would rather use our own money and not be answerable to anybody else.”

Will the future be carefree?

The Future

Interest from consumers in health and well being keeps gaining momentum. While this means Vitabiotics is playing in a high potential space, that category growth is certain to attract more attention from competitors – from food, pharma and now technology – with deep pockets of their own or are backed by venture capital.

Vitabiotics needs to double down on the drivers that have already delivered growth – firstly, continuing to invest in developing strong brands with wide reach; second, innovating in new areas which will include things like DNA testing and personalised nutrition. In addition, it must grow direct-to-consumer sales in developed markets (ideally subscription-based) and despite recent frustrations, expand its export business.

Key takeouts

  • Consistency of leadership & strategy delivered 20+ years of sales & profit growth
  • Innovation & research has helped position Vitabiotics at the credible end of VMS
  • Brand architecture is based on an understanding of consumer benefits sought
  • Breadth of physical availability is critical in serving the consumer market
  • Marketing found a winning formula with celebrity endorsement – and stuck with it

Recent posts

To act, or not to act

To act, or not to act

Brand activism In the marketing echo chamber, it can be easy to get disenchanted with your role. Nowadays if your hair gel, extruded potato snack or toothpaste is not involved in some planet-saving endeavour or fight for human rights, then the zeitgeist implies we...

The best of frenemies

The best of frenemies

Why marketing & finance should work better together It could be said that marketing & finance functions have historically been pretty distant from each other. Stereotypically they are the organisations’ left and right brains, but in practice it’s often less of...

WHSmith – defying gravity?

WHSmith – defying gravity?

How strategic choices are shaping the future of a 200 year old retailer As any traveller who’s forgotten their headphones will tell you, there’s a whole chunk of money to be made selling gadgets and travel accessories in airports. That’s a fact not lost on WHSmith...